In the economic world we heard a lot about subprime mortgages this year. But, as we look ahead to 2008, you may be hearing that word, subprime, in a different context.

MARKETPLACE's Steve Tripoli is here to tell us more. And, Steve, just what are we talking about here with these other forms of subprime?

STEVE TRIPOLI: Well, Alex, it turns out the loose lending standards of recent years were not confined to mortgages unfortunately. The whole new industries built on subprime lending have risen from nowhere over the past 10 or 15 years. There are high-interest auto lenders, subprime payday loans tied to your next paycheck, plus check cashing services that charged high rates, rent-to-own furniture stores, the list goes on. All of them are fairly new ways of lending, all of them are very expensive and all of them are taking extra dollars out of millions of consumers' wallets.

COHEN: Extra dollars, how?

TRIPOLI: Well, most people would qualify for cheaper credit, but they either don't realize or these businesses convinced them they can't do better. You won't be surprised to learn that these businesses concentrate in low and middle income communities where there's less financial sophistication. But affluent communities are, by no means, immune.

COHEN: How big a deal is this?

TRIPOLI: Well, Alex, I recently ran across a fascinating way of measuring the growth of this lending world. Steve Graves, a professor of geography at Cal State University in North Ridge, is mapping the locations of these businesses and listening to this is just one example. This is about payday lenders.

They have gone from almost zero to 22,000 storefronts since 1990. In the same period, by comparison, Starbucks has gone from zero to just 8,500.

COHEN: Hmm.

TRIPOLI: So almost three times as many outlets for this one kind of subprime lending as there are Starbucks stores.

COHEN: So what can consumers do if they want to stay out of subprime trouble?

TRIPOLI: Well, say, first of all, if you have a little rainy day money put aside, you won't need these loans that often start out small, but can become long-term debt traps. And there was a little hope in the horizon from traditional financial sector, which are being prodded by the government agency, the FTIC.

Here's what Kathleen Keest at the Center for Responsible Lending told me when I spoke with her today.

Ms. KATHLEEN KEEST (Senior Policy Counsel, Center for Responsible Lending): A lot more of the standard lenders are coming up with alternative products, credit unions and, increasingly, banks that are responding to the FTIC's leadership on this issue, are coming up with small dollar lending that is both much more reasonably priced and can help get you into a little bit of saving.

COHEN: Steve, what does the growth of this kind of lending mean in a larger economy?

TRIPOLI: Well, Alex, it means that a lot more people are spending a lot more money for credit these days and we haven't even mention credit cards here where the interest rates are subprimed very often and the debt revolves from month to month. And all of these catching up with families. There are disturbing signs of debt stress in several areas of lending. And that in turn may well lead to weaker consumer spending, which is a red flag for a recession.

So in 2008, I think we've got to look at getting this kind of very high-price debt under control from the originators to the regulators right to the borrowers.

COHEN: Thank you so much, Steve. That's Steve Tripoli of Public Radio's daily business show MARKETPLACE. It's produced by American Public Media.

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